[Federal Register Volume 60, Number 59 (Tuesday, March 28, 1995)]
[Notices]
[Pages 15947-15948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7576]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35523; File Nos. SR-Amex-95-13; SR-CBOE-95-13, SR-NYSE-
9504, SR-PSE-95-05, and SR-PHLX-95-10]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Changes by the American Stock Exchange, Inc., the Chicago Board Options
Exchange, Inc., the New York Stock Exchange, Inc., the Pacific Stock
Exchange, Inc., and the Philadelphia Stock Exchange, Inc., Relating to
Permanent Approval of the Hedge Exemption Pilot Programs
March 22, 1995
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on February
1, 1995, the Chicago Board Options Exchange, Inc. (``CBOE''); on
February 3, 1995, the Philadelphia Stock Exchange, Inc. (``PHLX''); on
February 21, 1995, the Pacific Stock Exchange, Inc. (``PSE''); on
February 28, 1995, the New York Stock Exchange, Inc. (``NYSE''); and on
March 14, 1995, the American Stock Exchange, Inc. (``Amex'') (each
individually referred to as an ``Exchange'' and two or more
collectively referred to as ``Exchanges'') filed with the Securities
and Exchange Commission (``SEC'' or ``Commission'') the proposed rule
changes as described in Items I, II, and III below, which Items have
been prepared by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule changes
from interested persons.
I. Self-Regulatory Organizations' Statement of the Terms of
Substance of the Proposed Rule Changes
The proposed rule changes filed by the Amex and PHLX request
permanent approval of the Exchanges' pilot program for exemptions from
equity option position limits for certain hedged positions.\1\
\1\Position limits impose a ceiling on the aggregate number of
options contracts on the same side of the market that can be held or
written by an investor or group of investors acting in concert.
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The proposals filed by the CBOE, NYSE, and the PSE request
permanent approval of the Exchanges' pilot programs for position limit
exemptions for certain hedged equity option positions and certain stock
index option positions.
The text of the proposals are available at the Office of the
Secretary of the respective Exchanges and at the Commission.
II. Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
In its filing with the Commission, the self-regulatory
organizations included statements concerning the purpose of and basis
for the proposed rule changes and discussed any comments it received on
the proposed rule changes. The text of these statements may be examined
at the places specified in Item IV below. The self-regulatory
organizations have prepared summaries, set forth in sections (A), (B),
and (C) below, of the most significant aspects of such statements.
(A) Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
The Commission has previously approved pilot programs proposed by
the Amex and the PHLX providing exemptions from positions limits for
certain fully hedged equity option positions.\2\ In addition, the
Commission has previously approved pilot programs proposed by the CBOE,
the NYSE and the PSE providing exemptions from position limits for
certain fully hedged equity option positions and/or stock index option
positions.\3\ The Exchanges' pilot programs were most recently extended
through May 17, 1995.\4\
\2\See Securities Exchange Act Release No. 25738 (May 24, 1988),
53 FR 20201 (June 2, 1988).
\3\See Securities Exchange Act Release Nos. 25738 (May 24,
1988), 53 FR 20201 (June 2, 1988) (order approving CBOE's equity
option hedge exemption pilot programs); 25739 (May 24, 1988), 53 FR
20204 (June 2, 1988) (approving CBOE's stock index option hedge
exemption pilot program); 27786 (March 8, 1990), 55 FR 9523 (March
14, 1990) (order approving NYSE's equity option and stock index
option hedge exemption pilot programs); 25811 (June 20, 1988), 53 FR
23821 (June 24, 1988) (order approving PSE's equity option hedge
exemption pilot program); and 32900 (September 14, 1993), 58 FR
49077 (September 21, 1993) (order approving PSE's stock index option
hedge exemption pilot program).
\4\See Securities Exchange Act Release Nos. 24986 (November 18,
1994), 59 FR 60856 (November 28, 1994) (order approving File Nos.
SR-Amex-94-49, SR-CBOE-94-41, SR-PSE-94-33, and SR-PHLX-94-53); and
35194 (January 5, 1995), 60 FR 2800 (January 11, 1995) (order
approving File Nos. SR-NYSE-94-47).
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Each of the pilot programs allow the underlying hedged positions to
include securities that are readily convertible into common stock.\5\
Under all of the pilot programs, exercise limits continue to correspond
to position limits, so that investors are allowed to exercise, during
five consecutive business days, the number of option contracts set
forth as the position limit, as well as those contracts purchased
pursuant to the pilot program.\6\
\5\Under the pilot, the Exchanges must determine on a case-by-
case basis whether an instrument that is being used as the basis for
an underlying hedged position is readily and immediately convertible
into a security that is convertible at a future date, but which is
not presently convertible, is not a ``convertible'' security for
purposes of the equity option position limit hedge exemption until
the date it becomes convertible. In addition, if the convertible
security used to hedge an options position is called for redemption
by the issuer, the security would have to be converted into the
underlying security immediately or the corresponding options
position reduced accordingly. See, e.g., Securities Exchange Act
Release No. 32904 (September 14, 1993), 58 FR 49339 (September 2,
1993) (order approving File No. SR-CBOE-91-43).
\6\Exercise limits prohibits the exercise by an investor or
group of investors acting in concert of more than the number of
options contracts specified in the position limit rule within five
consecutive business days.
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The Exchanges believe that the proposed rule changes are consistent
with Section 6(b) of the Act, in general, and further the objectives of
Section 6(b)(5), in particular, in that they are designed to protect
investors and the public interest and to remove impediments and perfect
the mechanism of a free and open market.
(B) Self-Regulatory Organizations' Statement on Burden on Competition
The Exchanges do not believe that the proposed rule changes will
impose any burden on competition.
(C) Self-Regulatory Organizations' Statements on Comments on the
Proposed Rule Changes Received From Members, Participants or Others
Written comments on the proposed rule changes were neither
solicited nor received. [[Page 15948]]
III. Date of Effectiveness of the Proposed Rule Changes and Timing
for Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reason for so finding or (ii) as to
which the self-regulatory organizations consent, the Commission will:
(a) By order approve such proposed rule changes, or
(b) Institute proceedings to determine whether the proposed rule
changes should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule changes that are filed
with the Commission, and all written communications relating to the
proposed rule changes between the Commission and any person, other than
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying at the Commission's Public Reference Section, 450 Fifth Street,
NW., Washington, D.C.
Copies of such filing will also be available for inspection and
copying at the principal office of the above-mentioned self-regulatory
organizations. All submissions should refer to the file number in the
caption above and should be submitted by April 18, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
\7\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-7576 Filed 3-27-95; 8:45 am]
BILLING CODE 8010-01-M
